Medicaid Tries New Approach With Sickle Cell: Companies Get Paid Only if Costly Gene Therapies Work

Serenity Cole took advantage of Christmas last month to relax with her family near her home in St. Louis, do crafts and visit friends.

It was a contrast to how Cole, 18, spent part of the 2024 holiday season. She was in the hospital — a common occurrence due to sickle cell anemia, a genetic disease that damages oxygen-carrying red blood cells and has for years caused debilitating pain in her arms and legs. The crises often forced her to cancel plans or miss school.

“With sickle cell disease, it hurts every day,” she said. “It may be more tolerable some days, but it’s a constant thing.”

In May, Cole underwent a months-long gene therapy treatment that helps reprogram the body’s stem cells to produce healthy red blood cells.

She was one of the first Medicaid enrollees nationally to benefit from a new payment model in which the federal government negotiates the cost of a cell or gene therapy with pharmaceutical companies on behalf of state Medicaid programs — and then holds them accountable for the treatment’s success.

Under the agreement, participating states will receive “rebates and rebates” from drugmakers if treatments don’t work as promised, according to the Centers for Medicare & Medicaid Services.

That’s a stark difference from how Medicaid and other health plans typically pay for drugs and therapies: The bill is typically paid regardless of how much the treatments benefit patients. But CMS has not disclosed the full terms of the contract, including how much drug companies will reimburse if the treatment doesn’t work.

The treatment Cole received offers a potential cure for many of the 100,000 mostly black Americans with sickle cell disease, which is expected to shorten lifespans by more than two decades. But the cost of treatment poses a significant financial challenge for Medicaid, the joint state and federal insurer for low-income or disabled people. Medicaid covers about half of Americans with the condition.

There are two Food and Drug Administration-approved gene therapies on the market, one costing $2.2 million per patient and the other $3.1 million, with neither cost including expenses related to the long hospital stay.

The CMS program is one of a handful of health initiatives launched under President Joe Biden and continued under the Trump administration. The Biden administration signed the agreement with the two manufacturers, Vertex Pharmaceuticals and Bluebird Bio, in December 2024, opening the door for states to voluntarily join.

“This model is a game-changer,” CMS Administrator Mehmet Oz said in a July statement announcing that 33 states, Washington, D.C., and Puerto Rico had signed on to the initiative.

Asked for more details about the contracts, Catherine Howden, a CMS spokeswoman, said in a statement that the terms of the agreements are “confidential and have only been disclosed to state Medicaid agencies.”

“Addressing the high cost of medicines in the United States is a priority of the current administration,” the statement said.

Citing confidentiality, two Medicaid directors and the two manufacturers declined to reveal the financial terms of the agreements.

New therapies

Gene therapies, approved in December 2023 for people 12 years or older with sickle cell disease, offer a chance to live without pain or complications, which can include strokes and organ damage, and avoid hospitalizations, emergency room visits and other costly care. The Biden administration has estimated that sickle cell care already costs the health care system nearly $3 billion a year.

With many more expensive gene therapies on the horizon, the cost of sickle cell therapies portends financial challenges for Medicaid. Hundreds of cell and gene therapies are in clinical trials, and dozens could gain federal approval in the coming years.

If the sickle cell payment model works, it will likely lead to similar arrangements for other expensive therapies, particularly those that treat rare diseases, said Sarah Emond, president and CEO of the Institute for Clinical and Economic Review, an independent research institute that evaluates new medical treatments. “It’s a worthwhile experience,” she said.

Setting payment for drugs based on outcomes makes sense in the face of high treatment costs and uncertainty about their long-term benefits, Emond said.

“The juice has to be worth it,” she said.

Clinical trials for gene therapies involved fewer than 100 patients and followed them for only two years, leaving some Medicaid officials in the state wanting reassurance that they were getting a good deal.

“What we care about is whether the services actually improve health,” said Djinge Lindsay, chief medical officer for the Maryland Department of Health, which manages the state’s Medicaid program. Maryland is expected to begin accepting patients for the new sickle cell program this month.

Medicaid is already required to cover almost all FDA-approved drugs and therapies, but states have discretion to limit access by limiting eligible patients, implementing a lengthy prior authorization process, or requiring enrollees to pursue other treatments first.

Although gene therapy treatments are limited to certain hospitals nationwide, Medicaid officials say the federal model means more enrollees will have access to the therapies without other restrictions.

Manufacturers also fund fertility preservation, such as freezing reproductive cells, which could be damaged by chemotherapy during treatment. Typically, Medicaid doesn’t cover this cost, said Margaret Scott, director of the consulting firm Avalere Health.

Emond said pharmaceutical companies were interested in the federal deal because it could lead to faster acceptance of Medicaid treatment, compared to signing individual contracts with each state.

States are attracted to the federal program because it offers help tracking patients in addition to negotiating the cost, she said. Despite some secrecy around the new model, Emond said she expects a federally funded evaluation to track the number of patients in the program and their outcomes, allowing states to seek rebates if the treatment doesn’t work.

The program could last up to 11 years, according to CMS.

“This therapy may benefit many sickle cell patients,” said Edward Donnell Ivy, chief medical officer of the Sickle Cell Disease Association of America.

He said the federal model will help more patients access the treatment, although he noted its use will depend in part on the limited number of hospitals offering the multi-month treatment.

Hope for sickle cell patients

Before gene therapy, the only potential cure for sickle cell patients was a bone marrow transplant — an option available only to those who could find a suitable donor, about 25 percent of patients, Ivy said. For others, lifelong care includes medications to reduce the effects of the disease and manage pain, as well as blood transfusions.

About 30 of the 1,000 sickle cell patients enrolled in Medicaid in Missouri will receive the treatment in the first three years, said Josh Moore, director of the state’s Medicaid program. So far, fewer than 10 registrants have received it since the state began offering it in 2025, he said.

Less than a year into the federal program, Moore said it was too early to gauge its success rate, defined as the absence of painful episodes that led to a hospital visit. But he hopes that rate will be close to the 90% rate seen in the few years of clinical trials.

Moore said the federal program based on treatment effectiveness was favored over reducing fees for a new and promising therapy, which would endanger manufacturers’ ability to develop new drugs. “We want to be good stewards of taxpayer dollars,” he said.

He declined to comment on how much the state could save through the deal or disclose other details, such as how much drug companies might have to repay, citing contract confidentiality.

Lately, Cole, who underwent gene therapy at St. Louis Children’s Hospital, was able to focus on his hobbies — playing video games, drawing and painting — and graduate from high school.

She said she was happy to receive the treatment. The worst was the chemotherapy, she said, which left her unable to speak or eat – and involved sticking herself with needles.

She said her condition is “much better” and she hasn’t had any episodes of pain that led to hospitalization since finishing therapy last spring. “I’m just grateful I was able to get it.”